India has been a pioneer in adoption of solar pumps at scale. The government has set a target of installation of 1.75 million solar agriculture pumps and solar systems for another 1 million grid connected pumps by 2022 under KUSUM programme with up to 60% capital subsidy. Progress, however, is lagging with only 272,700 pumps installed by December 2020. To better understand the market, BRIDGE TO INDIA hosted a live dialogue with Mr. Ramakrishna Sataluri, Chief – Products and Marketing at Tata Power Solar on August 10, 2021. The company is one of the biggest players in this market.

The discussion began with a brief outline of the scheme targets and slow progress. Mr. Sataluri believes that the scheme has faced many teething challenges but significant progress has been made over the past years. Unfortunately, lot of momentum was lost with COVID posing challenges in on-the-ground marketing and installation activities. But Mr. Sataluri expressed confidence that with the government fully committed behind the scheme, deadline of 2022 would be extended shortly. He sees the market growing about tenfold to 500,000 pump installations annually by 2025-26.

Chhattisgarh, Andhra Pradesh and Rajasthan have emerged as solar pump leaders during 2019-20.

Figure: Solar Pump installation by state up till December, 2020

Source: BRIDGE TO INDIA research
Note: Data may exclude some installations under state schemes.

One of the major changes in the market is the way tenders are issued. Until about two years ago, most tenders were issued by state governments. Each tender had different technical specifications and size was typically small at less than 5,000 pumps. The tenders attracted participation mainly from local players resulting in inconsistent implementation and quality standards. Since appointment of Energy Efficiency Services Limited (EESL) as a central nodal agency, akin to SECI for utility scale solar projects, the tendering process has become more streamlined. EESL is now aggregating demand from various states and tender sizes have increased to as high as 3,17,975 pumps (equivalent to about 1,500 MW solar capacity). According to Mr. Sataluri, many other process changes including getting farmers to register their interest in advance, simplification of eligibility criteria and installation timelines have improved the market’s attractiveness and growth potential. The larger players like Tata Power and Shakti Pumps are also poised to fare better in the new dispensation.

Mr. Sataluri also talked about several core benefits for farmers including consistent supply of daytime power, higher productivity, improvement in groundwater levels, additional income through sale of surplus power to grid and physical safety. There was also a brief discussion on financing aspects. Mr. Sataluri mentioned that banks play a very crucial role but interest from mainstream commercial banks has been limited so far.

Amongst main challenges for the market, Mr. Sataluri cited low margins due to intense bidding process and high working capital. For instance, MNRE has specified benchmark cost for 5HP solar pumps as INR 445,000, however, prices fell to INR 404,000 in the recent EESL tender. He also mentioned that delays in subsidy payments need to be resolved. Improving these aspects including overall implementation and standardisation of documentation is critical for realising growth potential of the market.